Core bond yields fall as European shares open lower

* Euro zone periphery govt bond yields

LONDON, Aug 19 (Reuters) - High-rated government bond yields fell by around 2 basis points on Tuesday, as the market bullishness that saw stocks in the United States reach record highs eased off, while investors waited for euro zone inflation data and U.S. Fed minutes.

Wall Street’s S&P 500 surged overnight, hitting a new all-time high, but gains in Asian shares eased somewhat and European stocks were in the red soon after opening.

Euro zone HICP data for July is due at 0900 GMT. Economists polled by Reuters expect it to be at -0.3%, down from 0.3% the previous month.

The five-year, five-year breakeven inflation forward (a key market gauge of inflation expectations, which is watched by the European Central Bank) edged down further from its 6-month highs hit last week.

The German 10-year Bund yield was down 1 basis point at -0.47% at 0653 GMT, having touched a one-week low in early London trading.

“The Bund move clearly lacks conviction with weaker equities and a rallying euro failing to inspire,” wrote Commerzbank rates strategists Christoph Rieger and Cem Keltek.

“Today’s final euro area HICP should suggest that deflation fears are indeed overdone with core inflation at the upper end of the range seen in recent years,” they added.

Portuguese and Italian yields also dipped down, but to a much lesser extent, with the spreads between core and peripheral yields widening .

Uncertainties about the U.S. economic recovery and fiscal stimulus package continued to weigh on sentiment.

U.S. Treasury yields drifted lower in the previous session, ahead of a 20-year bonds auction at 1700 GMT and the release of minutes from the Federal Reserve’s July meeting.

Germany is due to issue 1.5 billion euros ($1.79 billion) of 30-year Bunds at 0930 GMT.

“30y Bund auctions of this size usually don’t cause larger hiccups,” Commerzbank’s Rieger and Keltek wrote.

“In view of the thin summer trading conditions and on the heels of the 6 billion euro syndicate tap in this bond last month, however, end-investor demand may still be subdued,” they added. ($1 = 0.8385 euros) (Reporting by Elizabeth Howcroft; editing by Philippa Fletcher)